Manufacturing growth at four-month high

UK manufacturing growth hit a four-month high in August on the back of new domestic contract wins, according to the latest PMI.

Production rose at the steepest pace in seven months, primarily as a result of domestic orders, while exports remained robust, linked to the weak pound.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index climbed to 56.9 in August, up on 55.3 in July and the second-highest level in over three years.

Firms reported increased business from mainland Europe, the US, China and Australia.

Output growth was recorded across consumer, intermediate and investment goods sectors and at both SMEs and large-scale producers.

Almost 31% of companies reported an increase in purchase prices, generally linked to the rising cost of commodities with some firms noting shortages for certain key inputs.

Business optimism improved to a three-month high and this was attributed to rising demand, new product launches, efforts to improve market share and expand into new markets, a stronger global economy and planned investment spending.

Duncan Brock, director of customer relationships at CIPS, said: “The impact on supply chains was less welcoming, as delivery times were stretched and supplier performance has recently been the weakest since the middle of 2011.

“The sector experienced one of its longest lists of material shortages for many years, so suppliers will have to develop more forward-thinking strategies to build up stocks and meet ongoing demand, if the current wave of optimism and purchasing activity continues into the last quarter of the year.”

Rob Dobson, director at IHS Markit, said: “The survey data suggest the manufacturing economy remains in good health despite Brexit uncertainty, and should help support ongoing growth in the economy in the third quarter, which will add fuel to hawkish policymakers’ calls for higher interest rates.”